Demand not expected to increase because of the impact of higher tariffs on trade.
The International Air Transport Association says air cargo volumes in 2019 are expected to be 63.1 million tonnes in 2019, similar to the 63.3 million tonnes recorded in 2018.
“Weakening of global trade is likely to continue as the U.S.-China trade war intensifies. This primarily impacts the cargo business, but passenger traffic could also be impacted as tensions rise. Airlines will still turn a profit this year, but there is no easy money to be made,” said Alexandre de Juniac (pictured above), IATA’s director general and chief executive officer. He made his remarks at IATA’s annual general meeting in Seoul, South Korea, which was held Saturday to Monday.
The prediction of a flat year follows two years of rising air cargo volume: 3.4% growth in 2018 and exceptionally strong growth of 9.7% in 2017. IATA said air cargo yields (revenue per freight tonne kilometer) are expected to be flat in 2019 after a 12.3% improvement in 2018, as cargo load factors fall further and supply-demand conditions weaken.
IATA has downgraded its 2019 outlook for the global air transport industry to a $28 billion profit (from $35.5 billion forecast in December). That is also a decline on 2018 net post-tax profits that IATA estimates at $30 billion.
“The business environment for airlines has deteriorated with rising fuel prices and a substantial weakening of world trade. In 2019 overall costs are expected to grow by 7.4%, outpacing a 6.5% rise in revenues. As a result, net margins are expected to be squeezed to 3.2% (from 3.7% in 2018). Profit per passenger will similarly decline to $6.12 (from $6.85 in 2018).
“This year will be the 10th consecutive year in the black for the airline industry,” said Juniac. “But margins are being squeezed by rising costs right across the board—including labor, fuel and infrastructure. Stiff competition among airlines keeps yields from rising.”
IATA said, “All regions are expecting a reduction in profitability with the exception of North America and Latin America.”
“North American carriers will deliver the strongest financial performance with a $15 billion post-tax profit (up from $14.5 billion in 2018). That represents a net profit of $14.77 per passenger, which is a marked improvement from just seven years earlier ($2.3 in 2012). Net margins, forecast at 5.5%, are down from 2018 levels, owing to higher-than-expected fuel costs and slowing growth. The limited downside in this region has been underpinned by consolidation, helping to sustain load factors (passenger plus cargo) above 65% and ancillaries, which limit the impact of higher fuel costs, keeping break-even load factors to 59.5%.”